While the Philippine peso’s close brushed the whiskers of another historic low at ₱60 per United States (US) dollar, Bank of the Philippine Islands (BPI) said this has yet to trigger wild price hikes that would prompt a forceful central bank intervention.

However, successive increases in global oil prices are translating into higher costs for power, transport, and fertilizers—a combination that might force the Bangko Sentral ng Pilipinas (BSP) to reverse its recent easing to curb rising consumer prices.

This comes as the peso plummeted to a fresh record low of ₱59.87 against the US dollar on Monday, March 16.

The BSP has confirmed it is intervening to help tame volatility in the foreign exchange (forex) market, but the local currency still hit an intraday low of ₱59.95 and a high of ₱59.7 after opening at ₱59.71, according to the Bankers Association of the Philippines (BAP).

BSP Governor Eli M. Remolona Jr. told Bloomberg that the central bank is actively intervening in the market. “Since the dollar is down, I assume some intervention can push the peso back down below ₱60,” he said.

Total trading volume declined to $1.805 billion from $2.228 billion last Friday, March 13, when the peso closed at the previous historic low of ₱59.735 against the greenback.

Jonathan Ravelas, senior adviser at Reyes Tacandong & Co., said the new historic low reflected the market’s reaction to global developments.

“The peso weakened anew to ₱59.87:$1 as the fog of the war keeps investors on the edge. Expect the currency to trade within the ₱59.6-59.9:$1 levels in the near term, as uncertainty persists,” Ravelas said.

Emilio S. Neri Jr., senior vice president and lead economist at BPI, told Manila Bulletin that the peso’s continued slide is still “not yet inflationary” on its own. He noted that the bigger concerns are elevated costs of oil, energy, transport, and fertilizers, which could loosen inflation expectations.

“If you put it all together, it looks like the BSP may have to walk back some of its rate cuts. If the war is protracted, more action may be needed,” Neri said.

For the Ayala-led lender’s economist, the central bank could hike the current 4.25 percent benchmark rate by 50 basis points (bps) if price movements in these items persist for a month, bringing the key policy rate back to 4.75 percent by the end of 2026.

The ongoing military aggression between the US, Israel, and Iran has kept uncertainty high for over two weeks. Neri said a quarter-point hike could be warranted if oil prices sustain above $100 per barrel.

He penciled in a more hawkish 125-bp increase for the year if the Middle East war stretches to six months, which would raise the key interest rate to 5.5 percent—one percentage point (ppt) below the 2024 peak.

MUFG Global Markets Research warned that the Philippine peso “will likely underperform if oil prices rise much further.”

Singapore-based United Overseas Bank Ltd. (UOB) noted that Asian currencies, including the peso, generally slipped against the greenback last Friday amid the escalating war in the Middle East, driving oil prices higher and strengthening the US dollar to a 10-month high.

Remolona recently signaled that monetary policy may tighten if oil prices sustain above $100 per barrel, as this could push inflation above the BSP’s four-percent target. Price movements below this level are considered manageable.

Rizal Commercial Banking Corp. (RCBC) chief economist Michael Ricafort warned that oil prices surging to their highest level in nearly four years could increase net imports, widen the country’s trade deficit, and raise inflation, thereby reducing disposable income for consumers and heightening the risk of stagflation.